Experts: Resolute made smart move to sell forestland to N.S.

By BRETT BUNDALE BUSINESS REPORTERPublished December 11, 2012 - 8:24pm

Forestry analysts say Resolute Forest Products Inc. played its cards right selling more than 220,000 hectares of timberlands to the provincial government.

The Montreal majority owner of the former Bowater Mersey Paper Co. wiped several liabilities from its books in one fell swoop, industry analysts said.

“They’ve sidestepped a huge pension liability and an environmental liability,” Kevin Mason, managing director of Equity Research Associates, said in an interview Tuesday.

The province is acquiring the shares of Bowater Mersey for $1 from Resolute and the Washington Post Co. Ltd. But those shares come with worker pension and severance liabilities estimated to be $118.4 million.

“It’s a good deal for Resolute because getting rid of that pension liability is pretty significant.”

Also, while the environmental cleanup costs for a groundwood mill would be less than a kraft pulp mill, which uses chemicals, Quinn said it still represents a burden on the company’s books.

“Environmental cleanup costs can be significant.”

Although the province has said cleaning up the industrial site would cost less than $10 million, its industrial use is expected to continue.

Resolute could not be reached for comment Tuesday. The Washington Post declined to comment on the transaction.

Meanwhile, in selling the large tract of land in southwestern Nova Scotia along with a factory site, wood fibre inventory and power generation plant to the province, Resolute has ensured another papermaker would not restart the defunct mill.

“The newsprint market has just been decimated over the past 10 years, and it’s still falling,” Mason said. “In that environment, the last thing you want to do is sell something and create a competitor.”

However, Quinn said Resolute still managed to create a buzz about international forestry players eyeing the company’s assets.

“Resolute played it well. They talked up the fact there might be other buyers for the timberland assets, including offshore money, which created a fear amongst people in Nova Scotia that they’d lose this huge, coveted resource.”

The provincial government likely faced pressure to step in and secure the asset for the public, he said.

Yet Peter Milley, a business consultant and Halifax Global Inc.’s founding partner, said the deal was good for Nova Scotia because it ensured control of the resource remained in the province.

Milley also said the Bowater Transition Advisory Team clearly encountered widespread support from across Lunenburg and Queens counties to acquire the resource.

“This is an opportunity to make a significant transformational change to the sector.”

He said it is an opportunity to move away from the high-volume but typically low-value commodity production approach to newer products that involve lower-volume but higher-value production.